[core view of this week] the steady growth of infrastructure has been reflected in social finance in January (see the analysis report “how much new social finance flows into infrastructure in January” issued by us this week for details), However, the economy has not yet shown signs of stabilization. It is expected that the steady growth policy will continue to increase before the economy is clearly stabilized, and the continuous improvement of prosperity expectations is expected to promote the continuous improvement of sector valuation. In order to observe the specific implementation of the steady growth of infrastructure, this week we conducted a micro survey of the infrastructure industry chain and found that many places are stepping up the implementation of early reserve infrastructure projects, the project information of construction companies has increased significantly, and some leading central enterprises and state-owned enterprises performed better in January. It is expected that the implementation of relevant infrastructure projects will be accelerated after the rework of migrant workers on the 15th of January, The physical workload is expected to accelerate. In addition, there have been signs of loosening of real estate funds recently, which is expected to partially repair the investment capacity of real estate enterprises. In the follow-up, under the requirements of stable growth, the real estate correction policy is expected to be issued. It is suggested to pay attention to the marginal loosening of real estate policy and the recovery of enterprise valuation in the industrial chain. At present, we continue to be optimistic about the main opportunities for steady growth: 1) undervalued infrastructure blue chips: core recommendations China Communications Construction Company Limited(601800) (core beneficiary infrastructure REITs promotion, pe7.0x), China State Construction Engineering Corporation Limited(601668) (Guosheng construction February gold stock, pe4.3x), key recommendations Power Construction Corporation Of China Ltd(Powerchina Ltd)(601669) (pe13x), China Railway Group Limited(601390) (pe5.1x), China Railway Construction Corporation Limited(601186) (pe4.1x), infrastructure design leader China Design Group Co.Ltd(603018) (pe9x); 2) High business flexibility direction: a) steel structure: steel structure continues to benefit from infrastructure improvement and manufacturing investment repair, with emphasis on Changjiang & Jinggong Steel Building(Group)Co.Ltd(600496) (pe12x) 、 Anhui Honglu Steel Construction(Group) Co.Ltd(002541) (the investment agreement of Woyang base is signed again, and the medium and long-term capacity is expected to continue to expand, pe19x); b) Affordable housing: Recently, the central bank informed that the loans related to affordable rental housing will not be included in the concentration management of real estate loans, and the development of the industry is expected to enter an accelerated period. It is recommended that Shenzhen Capol International&Associatesco.Ltd(002949) (pe13x); c) New power system: the national development and Reform Commission and the Energy Administration issued the opinions on improving the institutional mechanisms and policies and measures for green and low-carbon energy transformation, accelerated the construction of new power system, and mainly recommended the private distribution network EPCO leader Suwen Electric Energy Technology Co.Ltd(300982) (pe23x); d) Urban pipe network: the demand for energy-saving transformation of urban heat supply network is expected to accelerate, and the leader in heating energy saving Runa Smart Equipment Co.Ltd(301129) (pe18x) is recommended.
Summary of a series of research on steady growth: the implementation of policies is in progress, and the infrastructure boom is expected to accelerate upward. Since the central economic work conference set the tone for steady growth at the end of last year, in January this year, all ministries and commissions stepped up the implementation of relevant policies, including the national development and Reform Commission accelerating the approval of major projects, the Ministry of finance supervising the issuance of special bonds and fund allocation, and the central bank encouraging commercial banks to increase loans for infrastructure projects. Since February, many places have begun to accelerate the implementation of early-stage reserve projects, and the orders of some leading companies have accelerated the improvement. It is expected that after the rework of migrant workers on the 15th day of the first month, the implementation of relevant infrastructure projects will be accelerated, and the physical workload is expected to accelerate. This week, we conducted a grassroots survey of a series of enterprises in the industrial chain: 1) in terms of central enterprises, according to the official websites and official micro information of central enterprises, since the beginning of the year, the major construction central enterprises have actively deployed, mobilized from top to bottom, and spared no effort to “stabilize growth and make a good start”. The business trend in January is good. For example, China Communications Construction Company Limited(601800) in the first half of January, there were more than 150 domestic bid winning projects, and the bid winning amount exceeded 90 billion yuan (accounting for 22% of the first quarter of last year); China State Construction Engineering Corporation Limited(601668) announced that in January, it won the bid for two large-scale highway PPP projects with a total of 35.1 billion yuan. Recently, nine large-scale livelihood projects (including subway, lithium battery plant, health, education, commerce, etc.) have been started intensively; China National Chemical Engineering Co.Ltd(601117) the newly signed contract amount, operating revenue and net profit of the group in January increased by 59.3%, 39.2% and 23% compared with the same period last year, and all major economic indicators reached a new high. At present, the central enterprises are in the post holiday resumption stage. It is expected that with the policy support and the positive response of enterprises, the operation is expected to achieve rapid growth in the first quarter. 2) In terms of state-owned enterprises, a leading construction enterprise in Anhui said that since the beginning of the year, the enthusiasm of local owners to promote infrastructure projects has increased significantly. Anhui Province plans to speed up the implementation of major projects such as transportation, water conservancy and affordable housing planned during the 14th five year plan this year. The construction enterprise won the bid for infrastructure orders in January, which has achieved a high increase year-on-year. 3) In terms of steel structure enterprises, a leading steel structure manufacturing and processing enterprise in Anhui said that steel structures are mainly used in public buildings and industrial buildings. This year, capital construction has increased steadily, and the development of prefabricated buildings has accelerated. The superimposed steel price is expected to stabilize, and the prosperity of the steel structure industry is expected to improve. If the supply and demand pattern changes significantly, the possibility of increasing manufacturing and processing fees cannot be ruled out, However, considering that the steel structure is a professional subcontracting business and is at the back end of the boom transmission of the industrial chain (Design – General Contracting – professional subcontracting), it will take about half a year from the start and implementation of the project to the procurement of steel components, with a steady growth, and the relevant orders are expected to be released gradually in the follow-up.
China Communications Construction Company Limited(601800) : the issuance of infrastructure REITs is expected to speed up, and the company’s operating assets are leading, which is expected to benefit in depth. 1) It is expected to speed up the issuance of infrastructure laws and regulations in the future. Recently, the Ministry of Finance and the State Administration of Taxation updated the tax policy announcement of infrastructure REITs, focusing on optimizing the tax policy before and after the issuance and establishment of infrastructure REITs, so as to reduce tax friction. It is estimated that taking the Jiatong project declared by China Communications Construction Company Limited(601800) as an example, the tax cost can be comprehensively saved, accounting for about 0.3% – 0.4% of the project evaluation amount, which is expected to improve the reporting enthusiasm of the owners of infrastructure projects. According to the recent documents issued by the national development and Reform Commission and the China Securities Regulatory Commission, the application areas and types of infrastructure REITs have been widened, but the audit standards such as project operation quality have not changed significantly.
It is expected that with the continuous improvement of policies, the issuance of infrastructure REITs is expected to speed up significantly this year. 2) The accelerated issuance of infrastructure REITs is expected to broaden infrastructure financing channels and improve capital turnover and business model of construction enterprises. From the industry level, the accelerated issuance of infrastructure REITs is expected to expand the financing channels of infrastructure investment and enhance the medium and long-term growth expectation of the industry. For construction enterprises, first of all, we can revitalize stock assets, optimize financial statements, accelerate capital turnover efficiency, improve roe, and form a model cycle of “investment construction withdrawal investment”. Secondly, if REITs expands to form a perfect trading market, the equity liquidity of infrastructure projects will increase, the issuance premium rate is expected to increase, and the value of high-quality operation projects in hand is expected to be revalued. 3) China Communications Construction Company Limited(601800) currently has a leading scale of projects in operation, and is expected to continue to benefit from the accelerated issuance of infrastructure REITs in the future. By the end of June 2021, the company had controlled 24 expressways in total, with a total investment of about 183.8 billion yuan. In addition to the pilot projects with a total investment of more than 4.1 billion yuan (RE) in Jiatong, the total investment in the pilot projects has met the current investment conditions of more than 4.0 billion yuan (RE) in China, and the total investment in the pilot projects has met the current investment conditions of more than 4 billion yuan. We expect that after the successful issuance of the company’s first project and accumulated experience, qualified projects are expected to continue to apply for REITs pilot according to the company’s business needs. As the leader of pure infrastructure, the company is expected to significantly benefit from the overweight of stable growth policy. In the future, it is expected to continue to benefit from the accelerated pilot issuance of infrastructure REITs and continue to focus on recommendation.
The margin of real estate capital environment is loosening, and there is still policy space for steady growth of real estate. According to cnr.com, the opinions on the supervision of national commercial housing pre-sale funds have been issued recently. The supervision of pre-sale funds is “key quota supervision”, which is determined by the municipal and county-level urban and rural construction departments according to factors such as project cost contracts, which can ensure the amount of funds required for the completion of the project. When the funds in the supervision account reach the supervision amount, The funds exceeding the quota can be withdrawn and used by real estate enterprises. The opinions clarify the regulatory amount, payment scope and access conditions of regulatory funds, which is conducive to the standardization of pre-sale fund management of real estate enterprises and alleviate the shortage of funds of real estate enterprises. In addition, this week, the central bank and the China Banking and Insurance Regulatory Commission issued the notice on excluding the loans related to indemnificatory rental housing from the management of real estate loan concentration. The relevant loans issued by banking financial institutions to the indemnificatory rental housing projects holding the confirmation of indemnificatory rental housing projects are not included in the management of real estate loan concentration, On the one hand, it helps to enrich the capital of affordable rental housing, on the other hand, it also helps to further improve the capital environment of the real estate chain. According to Kerui data, in January, the sales amount of the top 100 real estate enterprises decreased by about 40% year-on-year. The sales performance of most large-scale real estate enterprises was poor and the investment willingness was low. The real estate contraction has become one of the core influencing factors of the economic downturn. Therefore, we see that the recent regulation has gradually started the correction of real estate policies in a stable growth environment, which is expected to partially repair the investment capacity of real estate enterprises and promote the improvement of the margin of real estate investment throughout the year, It is expected to drive the valuation repair of high-quality leaders in the real estate chain, with emphasis on recommending industry leaders China State Construction Engineering Corporation Limited(601668) and affordable housing design leaders Shenzhen Capol International&Associatesco.Ltd(002949) with real estate development and real estate construction as the core business, and paying attention to decoration leaders Suzhou Gold Mantis Construction Decoration Co.Ltd(002081) and Zhejiang Yasha Decoration Co.Ltd(002375) .
China State Construction Engineering Corporation Limited(601668) : real estate and construction businesses need to be revalued. The core benefit target of steady growth is continuously recommended! In January, we issued the company’s in-depth follow-up report “the supply side reform of the real estate industry is accelerated, and the leading value of central enterprises needs to be revalued”, and listed China State Construction Engineering Corporation Limited(601668) as a gold stock in February. We believe that it has great momentum for revaluation: 1) the real estate development business is expected to be revalued: under strict supervision, the supply side reform of the real estate industry is accelerated, and the market share is expected to further concentrate on the leading value of central enterprises and state-owned enterprises, The industry competition pattern is optimized, and the profitability of the project is expected to improve in the future. CNOOC real estate, the company’s main real estate platform, has long adhered to the low leverage business strategy and stable financial indicators. As a leader of central enterprises, it is expected to obtain more high-quality land resources under compliance requirements in the future, or acquire real estate enterprise projects with risks in operation, accelerate industry integration, realize the continuous improvement of market share, and the value is expected to be revalued. 2) The construction business is expected to be revalued: the market share of the company will increase from 4.5% in 2009 to 10.8% in 2021. In the future, factors such as centralized procurement of central enterprises, large-scale and comprehensive projects, and assembly development are expected to further accelerate the increase of the leading market share. In recent years, the company has continued to optimize the construction business structure, the proportion of infrastructure and public construction projects has been increasing, and the proportion of residential projects has decreased from a high of 50% in 2017 to 31% in the first three quarters of 2021, which is expected to drive the continuous improvement of profitability and operation quality of construction business. 3) National reform and steady growth promote valuation repair: the company actively promotes the reform of state-owned enterprises, carries out the fourth phase of restricted stock grant throughout the company, and implements restricted stock options in the overseas development of its subsidiaries. This year is the year when the three-year action plan for the reform of state-owned enterprises ends and the results are tested. A number of reforms are expected to fully stimulate the company’s business vitality and enhance the driving force of enterprise market value. At present, the company’s valuation is at an all-time low, with a dividend rate of 4%. The steady growth policy is expected to drive the valuation repair. 4) The net profit of the parent company is estimated to be RMB 54.9 billion, which is still 1.4-1.4 times higher than that of the parent company, respectively, with a year-on-year increase of RMB 54.9 billion and 1.4 times respectively. The segment valuation is reasonable, and the market value is 311.1 billion yuan, about 32% higher than the current market value.
Investment suggestions: at present, the main line of steady growth investment is clear, and the key points are optimistic: 1) undervalued infrastructure blue chips: core recommendations China Communications Construction Company Limited(601800) , China State Construction Engineering Corporation Limited(601668) (Guosheng construction February gold stock), key recommendations Power Construction Corporation Of China Ltd(Powerchina Ltd)(601669) , China Railway Group Limited(601390) , China Railway Construction Corporation Limited(601186) , and leading infrastructure design China Design Group Co.Ltd(603018) ; 2) High business elasticity direction: a) steel structure: steel structure continues to benefit from infrastructure improvement and manufacturing investment repair, with emphasis on Changjiang & Jinggong Steel Building(Group)Co.Ltd(600496) (pe12x), Anhui Honglu Steel Construction(Group) Co.Ltd(002541) (pe19x); b) Affordable housing: the construction of affordable housing undertakes the triple tasks of common prosperity, non speculation in housing and housing and stable economic growth. Its development is expected to enter an accelerated period. It is recommended Shenzhen Capol International&Associatesco.Ltd(002949) ; c) New power system: focus on recommending private distribution network EPCO leader Suwen Electric Energy Technology Co.Ltd(300982) (pe23x); d) Urban pipe network: the demand for energy-saving transformation of urban heat supply network is expected to accelerate, and the leader in heating energy saving Runa Smart Equipment Co.Ltd(301129) (pe18x) is recommended.
Risk tips: the risk of policy promotion is less than expected, the risk of epidemic impact is more than expected, the risk of accounts receivable, overseas business risk, etc.
